A company was incorporated with a capital value of 50000 at

A company was incorporated with a capital value of $50,000; at the end of ten years, the capital had increased in value to $90,000. The equivalent annual compound interest rate for the increase in the capital\'s value is closest to: ? a. 6.05% b. 1.06% O c. 8.00% d. 18.00%

Solution

We use the formula:
A=P(1+r/100)^n
where
A=future value
P=present value
r=rate of interest
n=time period.

90000=50000(1+r/100)^10

(90000/50000)^(1/10)=(1+r/100)

(1+r/100)=1.0605

r=(1.0605-1)*100

=6.05%(Approx).